Minimum Price Talks Heat up in the UK

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FILED JANUARY 1, 2010

The idea of minimum pricing has been tossed around for years in the UK but chances of it happening seemed more likely over the past week. In what led to an influx of speculation from the press, the lower House of Commons Health Committee said in a new report that setting a minimum price for each unit of alcohol would be the most effective way of bringing down alcohol consumption in the UK. The World Health Organization (WHO) also supports prices increases along with other methods in controlling alcohol.

Britain has been under a microscope for years for their allegedly lax alcohol system. Critics say alcohol is much too cheap and easy to purchase at any time, causing major problems with binge drinking. Britain’s four major supermarkets are often blamed for selling alcohol below cost. With price-fixing, alcohol would more than double at supermarkets. Prices would also go up at the on-premise but not as much since their prices are already higher. The plan would see the starting cost of drinks fixed at between 40 pence and 50 pence per alcoholic unit - leading to a six-pack of beer costing about £6 and a bottle of wine costing £4.50. Cheap bottles of cider could quadruple in price, according to the Daily Telegraph. The money would go towards public health campaigns.

The SNP have also proposed introducing a similar minimum price for alcohol in Scotland but were blocked by Labor. Andy Burnham, the Health Secretary, is the leader of the cause and hopes for support from conservatives. Members of the conservative Tory party advocate tougher licensing, marketing and labeling laws for alcohol drinks but it’s not known if they will support minimum pricing. They are expected to win the general election this year. According to the Daily Telegraph, ministers are working on a “staged process” to introduce minimum pricing. Initially, the drinks industry will have to increase warnings on labels, and then supermarkets and other retailers would be banned from selling alcohol at below cost. The minimum price will then be introduced as the third and final phase of the scheme.

Prime Minister Gordon Brown and the Labor Party historically oppose these types of restrictions in favor of more liberal alcohol laws. As if to drive the point home, a spokesman for Prime Minister Gordon Brown said today: “We have no plans to introduce minimum pricing for alcohol.” This certainly spells relief for the industry but doesn’t mean we’ve seen the last of minimum pricing in the UK or compulsory health messages with recommended weekly alcohol limits on bottles.

In response to the health report, the Wine & Spirit Trade Association (WSTA) chief Jeremy Beadles said: “We believe that policies to address alcohol misuse are most likely to succeed if they focus on problem drinkers rather than particular products. Evidence from other countries suggests that higher taxes and prices for certain drinks do not change the behaviour of those who misuse alcohol.”

PERNOD H1: US SALES HAVEN’T BENEFITED FROM RECOVERY

In a first half trading statement today, Pernod Ricard said sales ending December 31 in the US “have not yet benefited from the economic recovery” although sales remained “well oriented” in other countries in the Americas. Melissa Earlam of UBS said Pernod’s statement on the US confirms “what we already know that Holiday trading has not been great.”

Organic net sales declined -3% in the first 6 months. Sales in Q1 declined -4% but improved in Q2, declining -2%, “on a still challenging comparison basis.” Pernod said that mix was positive with a particularly better performance from spirits compared to wines and champagne. Business remained difficult in Europe, with however a good resistance in France and an improving trend in Eastern Europe.

MECKLENBURG ABC CHAIRMAN RESIGNS

After rejecting a request to resign earlier this week, Mecklenburg ABC Board Chairman Parks Helms has agreed to resign his post after allowing a Diageo rep to buy dinner for a group of 30 Mecklenburg ABC employees, including himself, and their guests. According to WCNC, Helms sent his resignation letter to Mecklenburg County Commission chairwoman Jennifer Roberts, saying that he would step down but violated no policy, procedure or law. Diageo faces fines as well.

Yesterday the North Carolina ABC Commission banned all gifts from the spirits industry to ABC staff. Jon Williams, chair of the state ABC Commission, also lambasted Parks in the press, claiming he is an example of a “culture of entitlement” in the ABC system along with other high level employees. The father and son who run New Hanover ABC have also come under fire for large salaries and even larger bonuses. They’re also accused of flying first class and spending money on other luxuries at the NABCA meeting in Phoenix last May.

Parks recently told investigators that he assumed the Mecklenburg board would pay for the dinner, to which Jon responded: “In other words, Parks Helms' statement is that he assumed the citizens of Mecklenburg County would pay the bill... There is no way the public should be expected to foot the bill for select employees and family members to have a party of seemingly unlimited price and extravagance.” Jon said that since taking this new position 3 months ago, he’s been surprised at the amount of time he’s spent dealing with “certain local ABC boards and their senior employees.”

WTO LAUNCHES DISPUTE SETTLEMENT AGAINST THE PHILIPPINES

The United States government has launched a World Trade Organization (WTO) dispute settlement against the Philippines’ discriminatory taxes on imported spirits, which can be as high as 43 times the tax rate applied to domestic spirits. This is in violation of a general WTO principal that says countries should not discriminate between imported and domestic products in their tax regimes. In 2008, U.S. spirits exports to the Philippines were valued at only $671,000. Globally, U.S. spirits exports surpassed $1 billion for the second consecutive year.

“The Philippines has imposed a blatantly discriminatory tax on imported spirits for well over a decade,” said Peter Cressy, president of the Distilled Spirits Council. “These exorbitant taxes have made it nearly impossible for U.S. spirits exporters to break into the $3 billion Philippines spirits market.” Discus is “very pleased” that WTO is getting involved and looks “look forward to working closely with the Office of the U.S. Trade Representative as the dispute settlement process moves forward,” Peter continued.

The first step in a WTO dispute is formal consultations between the parties. If that brings no resolution, the United States can ask that a panel be established to determine whether the Philippines has violated its WTO obligations.

WSD BRIEFS:

DIAGEO is delivering more than 45,000 pounds of food and emergency supplies to earthquake victims in Haiti tomorrow as a part of its Spirit of the Americas Humanitarian Aid program. The company’s specially commissioned 727 aircraft will leave Miami at 8:00am tomorrow morning. The supplies include basic medical care, beans, rice, cooking oil and Ensure. Diageo holds a minority stake in Braisserie Nationale d’Haiti S.A. that employs 1,300 people and brews Guinness and distributes brands such as Smirnoff, Johnnie Walker, Baileys and Tanqueray.

NEW HAMPSHIRE LIQUOR STORES are cutting hours to help save money. Thirty of the 78 locations in New Hampshire will be closing early on some days or closing all together on certain days of the week, starting this Friday and lasting through May.

WINE INDUSTRY LAUNCHES SUSTAINABILITY PROGRAM. The voluntary Certified California Sustainable Winegrowing program designed by the Wine Institute and CAWG sets the minimum standards for wineries and vineyards to be certified, reports The Press Democrat. An outside organization would verify their performance on a variety of socially and environmentally responsible practices. To date, 68% of California’s vineyards and 63% of the 240 million cases of wine it produces have participated in the program

DARRYL ROSEN is conducting a study to better understand the relationship between sales managers/supervisors and their salespeople. He’s prepared a confidential online survey and once the results are complete, we will share with WSD readers. Company leaders, managers and supervisors should click here. Beverage salespeople should click here.

Until tomorrow, Megan

“A business that makes nothing but money is a poor business.”Henry Ford

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